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The Econometrics of Finance and Growth / Beck, Thorsten
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Beck, Thorsten
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Debt Markets.
- Economic development.
- Economic growth.
- Economic Theory and Research.
- External finance.
- Finance and Financial Sector Development.
- Financial development.
- Financial institutions.
- Financial sector development.
- Information asymmetries.
- International Bank.
- Macroeconomics and Economic Growth.
- Payment services.
- Poverty Reduction.
- Pro-Poor Growth.
- Science and Technology Development.
- Statistical and Mathematical Sciences.
- Transaction costs.
- Local Subjects:
- Access to Finance.
- Debt Markets.
- Economic development.
- Economic growth.
- Economic Theory and Research.
- External finance.
- Finance and Financial Sector Development.
- Financial development.
- Financial institutions.
- Financial sector development.
- Information asymmetries.
- International Bank.
- Macroeconomics and Economic Growth.
- Payment services.
- Poverty Reduction.
- Pro-Poor Growth.
- Science and Technology Development.
- Statistical and Mathematical Sciences.
- Transaction costs.
- Physical Description:
- 1 online resource (45 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2008
- System Details:
- data file
- Summary:
- This paper reviews different econometric methodologies to assess the relationship between financial development and growth. It illustrates the identification problem, which is at the center of the finance and growth literature, using the example of a simple Ordinary Least Squares estimation. It discusses cross-sectional and panel instrumental variable approaches to overcome the identification problem. It presents the time-series approach, which focuses on the forecast capacity of financial development for future growth rates, and differences-in-differences techniques that try to overcome the identification problem by assessing the differential effect of financial sector development across states with different policies or across industries with different needs for external finance. Finally, it discusses firm-level and household approaches that allow analysts to dig deeper into the channels and mechanisms through which financial development enhances growth and welfare, but pose their own methodological challenges.
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